The “war to end all wars” was finally over in 1919 with the execution of the Treaty of Versailles. Europe was at peace. It would remain at peace for twenty years. It turned out the “war to end all wars” only set up Europe for the next conflict which was even greater. World War II would officially start in 1939 with Germany, led by Adolph Hitler, invading Poland. Winston Churchill, Britain’s lord of the admiralty in WWI[190]and its Prime Minister in WWII, stated the Second World War should have been easy to prevent because the Western Democracies only needed to enforce the Treaty of Versailles to stop Germany from rearming. Along with economic errors and the Great Depression, these flawed decisions paved the way to World War II.
After the Great War of 1914 to 1918, with its attendant slaughter of at least 8 million soldiers, the people of the United Kingdom, France, and the United States tried fixing the world in an attempt to prevent a repeat of WWI. To that end, the governments of the great powers including Great Britain, France, Germany, Japan, and the United States entered into arms limitations treaties to prevent arms races. Under these various agreements, the major world powers agreed to limit the tonnage of warships constructed, among other items. The League of Nations involved itself in keeping the peace through diplomatic efforts. Large peace organizations formed in America, England, and France to keep their countries out of wars. “Peace at any price” was their motto.
As it happened, the great powers would not have the money to engage in arms races. The Great Depression deprived the nations of funds needed to construct and field large armies or invest in extremely expensive weapons systems. No money equals no arms races. Peace seems to require the bankruptcy of all.
After the Great War, America, England, and France disarmed to a large degree and went back to civilian budgets. In America the US Army shrank dramatically, but the navy did somewhat better because nations usually avoided scrapping battleships like beer cans. Germany was stripped of its army and Austria-Hungary ceased to exist. Turkey also faced financial problems that limited its ability to rearm. In the USSR under Stalin, the Soviets began a massive rearming and rebuilding of its army. Its secret arms buildup included development of the excellent T-34 tank. During this period between 1919 and 1929 an economic boom of sorts was underway, and the nations of the world prospered. Europe could trade once more, even though Germany was on the ropes, and the USSR took itself out of international trade under their communist regime. Money was available for investing, and companies expanded to meet growing consumer demand.
From 1919 to 1933, the United States tried another experiment in abolishing evil. Just as the nation abolished slavery it would now abolish drunkenness by making sales of liquor illegal.[191] The Eighteenth Amendment to the US Constitution, approved on January 29, 1919, prohibited the sale of alcohol in America. This forced many distilleries, bars, and transportation companies out of business or into other businesses. The law made some very expensive property valueless. Legally owned property became contraband overnight. Once again, the government did not pay for the property it made worthless. After all, the property was not seized by the government for public use. Washington DC just said it was illegal to use any property for the now illegal production of alcohol.[192] The great experiment of taming drunkenness fell flat, and in 1932 Roosevelt and the Democrats ran on a platform of overturning the Eighteenth Amendment. Roosevelt was elected in a landslide in 1932 because of the Depression, but one might wonder how many voted Democrat because it would bring back booze (Even I may have voted for that. How dumb are these Republicans anyway?).
The Great Depression 1929-1942?
Background
From 1919 to about 1929, the world economic situation seemed okay. England and France were recovering from the war, supplies of food and manufactured products were plentiful, and living standards were going up. In the USA, President Calvin Coolidge’s administration was running a financial surplus, cutting taxes dramatically, and experiencing a growth in real income per person of 2.1 percent.[193] Underneath however, things were not so rosy. The world’s economic system developed dynamic cracks that were growing and endangering the global economic system.
The Great War devastated France, destroying large swathes of land requiring millions of francs to restore. France had taken on massive war debts with England and the United States which had to be repaid, but these large debts caused devaluation of the franc making repayment difficult.[194]France was counting on Germany to pay for everything through repatriations (“Germany will pay all” the French government proclaimed); however, the expected repatriations did not show up. Germany was broke. Payments were much lower than agreed and slow in coming. The problem of German repatriations dogged the European powers throughout the 1920s. Germany could not repay England and France, and America would not cancel Allied war debts. Several conferences were held, but no real solutions to the financial problems were ever found. The 1932 Lausanne Conference, held in the middle of the Great Depression, terminated the wrangling over German repatriations by requiring one final payment from Germany. Today it is clear that Germany received more in American loans than she paid in repatriations. Never trust accountants mixing with politicians.
Britain experienced critical economic problems as well. In 1922 the Conservatives called for protective tariffs, a move which would surely damage international trade. This was contrary to England’s traditional free trade policy. At the urging of Winston Churchill, Chancellor of the Exchequer, Britain went back onto the Gold Standard in 1925, but this also failed to re-establish stability in the world’s money markets. As trade began to shrink more nations enacted protective tariffs further damaging international trade.
On the financial front, credit markets were getting tight because the money supply was lessening as the decade wore on, businesses were worried about getting loans, and the supply of investment capital was drying up. This was taking place worldwide, and some of the problems included the debts being carried from WWI. In Germany, super inflation was threatening European economic stability. When the economic future turns bleak people with investment money pull back; thus, investment capital was vanishing. Except for Germany’s inflation, most of the problems were sub-rosa and not a concern for the public—at least, that is what the elite leaders of the world believed.
Britain’s Empire also proceeded to give Britain trouble. Former colonies now wanted independence and nationhood. England responded by giving many colonies more independence, including a parliament and independence in foreign policy, while still maintaining a close relationship to the mother country. Those former colonies included Canada, Australia, New Zealand, and the Union of South Africa. Most notable in not gaining additional independence was India. The new nations often refused to follow Britain’s foreign policy, thus complicating matters for Britain in the 1930s.
Political problems erupted all over Europe because of growing radical leftist and rightist movements in several European nations. Adolf Hitler, a Germany radical rightist who led the Nazi party, languished in prison in 1925 after a failed coup d’état. While there he wrote Mien Kampf (MyBattle) detailing his thoughts about the future of Germany.[195] Hitler’s radical ideas would eventually lead his Nazi party to winning elections in Germany, eventually gaining control of the nation itself. In his book he set out his future plans for conquest, however, few read the tome. Unfortunate, because Hitler adhered to this published plan after he assumed the office of Chancellor of Germany. Due to a good world economy during the early to mid-1920s neither the rightist nor the leftist movements made headway in Europe or Asia, but as the economic situation grew dire things changed. Communist movements gained ground with the result that rightist also attracted followers concerned about the Reds taking over. It was during the crisis of the Great Depression that men like Hitler gained power through the support of the common person who wanted a return to stability. The Great Depression brought on worldwide radical political changes, so please understand this unprecedented economic collapse was a globe changing event and a major reason for WWII.
In the 1920s, England and France were having money problems and sought loans from the United States, or loan extensions, to cover war debts and other matters. American bankers extended the loan payments and gave new loans to Europe keeping the nations economies afloat. It seemed to most these loans were good business because the future looked bright and money was being made everywhere. The banks thought that as the world economy continued improving the money would come flowing in. These assumptions of a bright future proved false.
Causes
We will now start an analysis of the Great Depression’s causes; however, they are still widely debated and unresolved. Many economists argue the 1920’s era displayed real growth, while others think it was an era of false prosperity—profitless prosperity—because business profits were weak even though the economy was booming. Raw data from the 1920’s indicate real profits and real growth, as manufacturing output rose over 23 percent, but underneath it all something else was eating at the foundations. That something else was the money supply. The Federal Reserve (Central Bank or Fed) was making money easy to get in the mid-1920s by increasing the money supply, and the Fed injected money into the credit markets. This, some say, created a boom economy based on money supply growth and easy loans, not business growth in real terms (whatever “real” means).
Economist Milton Friedman says the Fed reduced the money supply and raised interest rates after the 1929 crash, thus making the downturn worse; other economists say the Fed increased in money supply after the crash and propped up failing businesses, thus increasing the severity of the debacle. The cold facts: Between 1921 and 1927, the money supply increased 60 percent. That is a lot by historical standards, and made loans easy to obtain. Starting in 1928, the Fed began tightening the money supply by raising the discount rate (the rate paid to borrow money) from 3.5 percent to 5 percent, thus making loans harder to get. Then came the 1929 stock market crash. In 1931 the money supply was decreased 30 percent or more, and in 1936 the central bank doubled the reserve requirements (the amount of money a bank has to keep on deposit as a safety net against failure); thus, taking more money out of the financial system. Those differentials represent a large swing in the supply of money between 1927 and 1936. Note that the Feddecreased the money supply after the crash. Private business capital investment also fell to zero, creating a situation where money was almost impossible to obtain. Everyone was living hand to mouth. Sounds like Milton Friedman was right. The Federal Reserve took money out of the system before and after the crash, just when it needed money the most, thereby increasing the severity of the Great Depression. The problem in studying the Great Depression revolves around the chosen economic theory, because that determines which statistics are the most important, and how they are interpreted. One thing is certain, the crash of 1929 became a worldwide disaster throwing people out of work in great numbers and causing starvation and fear on a world wide scale.
We must now look at a few economic concepts that are central to understanding the Great Depression.
Money Supply—Money Value
Money supply and money value are esoteric economic and banking concepts of major importance to the modern world, and understanding how the Great Depression is analyzed. A nation’s money supply is the amount of money in circulation in the nation’s economy. This is important because it determines the amount of money available for bank loans. A nation’s central bank tries to control the nation’s money supply, among other things. If money is easily available to banks they will try and loan it out by dropping interest rates, because loans are how banks make money. When there is less money available banks reduce lending and borrower’s interest rates rise.
Another key factor is the value of money. Strange as it may seem, money does vary in value in relation to other currencies, especially if they are “floated” (not backed by gold or silver) which allows money to rise or fall in value with the strength of a nation’s economy. If one nation’s economy is strong its money will have more value than an economically weak nation. Note what happens during value changes. As the value of a nation’s money increases, its merchants can buy more goods from other nations because the outside products cost relatively less, however, it makes it harder to sell goods because the cost of its products rise with the value of its money. When the value of money shifts then buying power shifts. When a nation just prints money without backing it up with gold the value of its money decreases because there is more of it. If the supply of money decreases, the value of money will normally increase because there is less of it.[196] All this can be very obscure, as everything from cash flow to emotion impacts the increase or decrease in the value of money, and often in ways not fully agreed upon by economists.
In general, the central bankers would rather that the value of money remains stable, but many elements of a society push and pull on the government to favor their position. Debtors, like farmers, want “easy money” so they can borrow dollars and then watch their value fall because of inflation, thus paying back their debt in cheaper dollars than they borrowed. Creditors, such as people selling farm equipment, want “tight money” so the value of the money stays the same allowing them to receive full value for their loans even if they are paid off over time. In any event, numerous factors influence the value of money, so its value changes a lot. For example, I once purchased a German Olympic air rifle at what I thought was a high price. Checking the price of the air rifle one year later it had jumped over 30 percent. The product was no different, but the value of the Euro (a European currency) increased relative to the US dollar; thus, increasing the price in US dollars. However, the price of US made air rifles stayed the same thereby making them more competitive. If a US merchant imported those German air guns, he would pay 30 percent more than a person selling the same air gun in Germany. However, a German air gun merchant could import US made units for 30 percent less because of the growth in value of his nation’s money. In theory, when a country’s money increases in value the money begins to leave the country because its citizens can buy items abroad cheaper.
In 2010, a controversy continues between the US and China because China keeps the value of its currency artificially low compared to US dollars; thus, keeping the prices of their goods low. This value differential angers US merchants who say China is cheating in trade competition and driving US manufactures out of business. Now the US central bank is lowering the value of the dollar causing more turmoil in the world money markets. As one can see, monetary value and supply is serious stuff in international relations.
Money supply and money value tie to another economic idea, the gold standard. This simply means that when a nation is on the gold standard that nation’s paper money can be traded for gold bullion (you know, the real stuff). Many economists claim the 1800s and early 1900s were prosperous because most nations adhered to the gold standard. In America, for example, the government promised its paper money was redeemable for gold at a rate of $20.67 per ounce.[197] Having a currency on the gold standard helps stabilize its value, stabilizes the money supply, contains inflation, and makes international trade easier. Using the gold standard, a nation can only print money up to the value of the amount of gold it holds. Since the amount of gold and the amount of paper money must be equal, excess money cannot be printed and this controls inflation. Since a nation on the gold standard cannot just print money the belligerents in WWI went off the gold standard, allowing them to print more money to pay for the war. This, of course, led to economic problems in the 1920s and 1930s as nations tried to readjust by going back on the gold standard. During WWI, nations incurred big debts with devalued money (money printed without backing by gold) and were paying the debts back after the war in high value money (money backed by gold). This split in money value contributed to instability in the financial markets in the 1920s. Few nations today are on the gold standard.
Instability in the value of money greatly affects international trade. What many overlooked in 1929 was the interconnected nature of the world economy. No nation stood alone any longer in the economic world. Events in one nation often had worldwide ramifications. As events would soon show, the interconnectedness ran deep.
Interest Rates
interest rates are another economic concept we should try to understand. Once again, interest rates influence business and personal loans. Private banks borrow funds from the central bank at set interest rates and then loan the money to their customers. The banks then add a few percentage points to the federal loan percentage and then loan the money to the private sector. Thus, as the central bank increases their interest rates to banks, the banks have to increase their interest rates to their customers, and it becomes harder for businesses and individuals to obtain a loan.
This is important to the national economy because, like the money supply, it affects a bank’s willingness and ability to loan. As loan funds dry up businesses find it harder to expand, hire new workers, or buy better equipment. On the other hand, if too much money is available and being loaned out below market rates this causes an economy to “heat up” or begin expanding faster than it should, resulting in inflation hampering the economy and destroying its ability to function if the malady gets bad enough.[198] A nation’s central bank tries to ensure that enough money is available for loans, at reasonable rates, so the economy grows at a steady but sustainable rate, without much inflation, and no hefty contractions (depressions and deep recessions). This is difficult, because economies respond slowly to changes in the money supply, interest rates, and changes in monetary valuation. Months can pass before economic changes become evident, and by then some other change may be necessary to keep the economy on track (steady but reasonable expansion without much inflation and reasonable contractions or corrections). [199]
When the money supply gets tight and loans are hard to obtain businesses stagnate and often stop hiring or start laying workers off to save money. Fewer employed people results in other businesses selling fewer items and they start to lay off workers. This cycle, if continued, can trigger a depression and destroy an economy. When the money supply is easy and loans are easy to obtain businesses may borrow to expand and hire more workers. More employed people means more goods are sold. If many people try to buy the same items the prices will increase under the rules of supply and demand. If these prices continue to rise they can cause runaway inflation which can also destroy an economy. It is a tricky balancing act to keep economies on track.
Prior to the advent of the central bank concept, financial markets set the interest rates banks could charge for loans without government interference. Coupled with the gold standard, the market handled the variables of money supply, monetary value, and the interest rates charged for loans very well before the depression. During the Great Depression, nations went off the gold standard and began economic manipulation, eliminating the free market financial mechanisms setting interest rates and other monetary variables. This was a major and permanent change in the financial world.
Tariffs
Tariffs are critical to international trade. tariffs are a financial charge placed on goods coming in from foreign nations, thus making foreign-made goods more expensive. The international community knows that if one nation raises tariffs the nations negatively impacted will also raise tariffs. In practice, England might raise tariffs 10 percent on cars from the United States, and in response the United States will raise tariffs on English tea by 15 percent. Then England will retaliate for that US move, and back and forth it goes until both nations price themselves out of the markets for tea and cars. In 1930, the Congress of the United States passed very high tariffs on goods from other nations in the Smoot Hawley Tariff Act. This could not have come at a worse time. The world’s nations responded by rising their tariffs and international trade began to implode, especially for exports from the United States. Fewer export goods sold because the overseas price took buyers out of the market. This tariff act, along with retaliatory acts passed by other nations, prolonged and increased the severity of the depression and made the disaster truly global.
The Contraction Starts
By 1929 in the United States businesses faced new problems getting loans because the money supply was shrinking. Tariffs were going up and decreasing trade. The same was happening around the world. In essence, business was shutting down, markets were contracting, the economies of the world were starting to collapse, and business investment was falling precipitously. Somehow, this economic earthquake remained silent until October 25, 1929.
In October of 1929, all illusions came to an abrupt end. The US Stock Market crashed. Billions were lost on the New York Stock Exchange in just one day. Industrial stocks peaked at a high of 452 in 1929, but by 1932 industrial stocks were at 58. By 1932 in the US 23 million were out of work. The 1929 crash started a panic and millions of institutions and individuals began selling stock causing a continuing and precipitous market decline. Many paper millionaires, because of their extensive stock holdings, found themselves paupers within a few days. Some large banks failed because they held substantial stock investments. The panic spread to the middle class who owned few stocks but kept savings accounts in local banks. A bank does not keep enough money on hand to pay all its depositors their money at the same time. Banks loan out the deposited money, retaining only a small amount in demand deposits to pay the few customers coming into the bank on a normal day wanting cash. Because of the stock market crash thousands of depositors descended on banks demanding their money. The banks could not pay; consequently, banks began to failby the hundreds all over the nation. When the local banks failed they took the depositor’s money with them into default causing people all over the United States to lose their life’s savings. As a result, fewer people put money into banks resulting in more money going out of circulation (and under mattresses) further decreasing the money supply and making money harder to obtain. As fear of the economic future took hold fewer people purchased items not absolutely needed, the business community suffered a greater slowdown, and more people experienced layoffs. Therefore, the descending economic spiral began and would not stop.
The economic crash became worldwide. American loans to Europe, previously easily extended, were now called. The American banks needed that money, but the European nations could not pay. The chaos in the world economy caused even more trouble, and as manufacturing declined more people were laid off, and with more layoffs fewer goods were bought (people without work stop buying) causing more layoffs. Things began to look very bleak. This was a downward spiral that fed on itself. Stopping this cycle became the major focus of economists all over the planet, but classical economic theories of the 1920s seemed unable to explain it. Unfortunately, governments were already trying to “solve” the crisis.
Hoover and Roosevelt—The Twins of Economic Failure
Governments around the world responded poorly to the crisis. In America, President Herbert Hoover began lobbying businesses to maintain high wages. He was certain if wages remained high people would keep buying, the national economy would right itself, and things would be fine. As the downward trend continued Hoover instituted government work programs and raised taxes to pay for them. President Hoover tried many things to overcome the Depression that no president before him dared attempt. In fact, his intervention into the economic system was unmatched until his successor took office. When Hoover lost the presidency to Franklin D. Roosevelt the new administration went far beyond what Hoover tried, but the focus of the effort was fundamentally the same. Under Roosevelt the Congress instituted massive work programs, tried to control wages and prices, tried to prop up farm-produce prices, supported union organization of labor in large industries, and raised taxes far more than Hoover’s administration to support new and larger government programs. Roosevelt created regulatory programs stifling competition in an attempt to raise prices because competition kept them down. The National Recovery Act, a centerpiece of Roosevelt’s economic plan, created business cartels with fixed prices and criminal prosecution for anyone trying to undercut the set price. The US Supreme Court ruled the act unconstitutional. An enraged Roosevelt moved to “pack” the Supreme Court with additional justices favoring his programs.[200] The Court converted under this pressure, approving New Deal legislation even if it breached Constitutional standards.
Roosevelt fought to end the Depression and tried everything his economic advisors—mostly university professors—could think up. Experimentation with everything became acceptable because of the national emergency. If a program failed they would try something else, but everything they tried involved deep government interference with the capitalist market economy. Most of the interference came under the philosophic heading of corporatism, or tripartite control. Corporatism means government combined with big business to create cartel like situations limiting competition and imposing price controls. Under a typical tripartite scheme government, big business, and big unions join together to decide production levels, wages, prices, and regulatory oversight routines. With both corporatism and tripartite concepts the government has the ultimate say so, and it can enforce the decisions of the group with government power. These concepts were implemented in the Great Depression, WWI and WWII, although less effectively in the US than in the nations of Europe. Both ideas, like socialism, destroy the free market.
Strangely, if Hoover and Roosevelt had done nothing the Depression in the United States may have ended in a year to perhaps three years. Today there is little doubt that government interference with the market economy prolonged and deepened the Great Depression.[201] Sharp downturns occurred in previous years under various presidents, but the government sat still allowing the recessions to run their course. Usually, they cut taxes and just rode out the problem for a few months. From 1854 to 1919, the averagedownturn was over in 17 to 24 months (see stlouisfed.org). From 1873 to 1879 a severe panic hit the nation; however, the government allowed the economy to punish marginal businesses, and the recovery, although delayed, was very robust. In 1920 through 1921 another panic hit and unemployment reached a high of 11.7 percent, but the government, under President Coolidge and Treasury Secretary Mellon, remained aloof and the adjustment was swift. Unemployment fell to 2.4 percent in 1923. After World War I bigger government was the rule, and some intellectuals (university professors) thought the government could solve the economic hardships, overturn the rules of classical economics, and build a bright tomorrow. They were very wrong. Nearly everything the government did under Hoover and Roosevelt was wrongheaded and backfired in ways beyond imagination. Huge voting majorities continued to back Roosevelt and the Democrats because they were “doing something” about the Depression. Roosevelt’s propaganda was excellent, and the public failed to understand the harm done by its well-meaning, but economically ignorant, government leaders.
By the mid to late1920s America increased production by 24 percent and real income grew by 2.1 percent; that is real prosperity. The next ten years stood in stark contrast to the prosperous 1920s. Even after the 1930s and 1940s America’s problems continued, and the nation’s return to true prosperity occurred in the 1950s.[202]
A few statistics should help focus the issue:
1929 Unemployment 3.3%
1930 " 8.9
1933 " 24.9 (Roosevelt takes office in March)
1935 Unemployment 20.1%
1937 " 14.3
1938 " 19.0 (5 years in office)
1941 " 9.9 (8 years in office)[203]
Clearly, the chart shows FDR’s New Deal did not solve America’s economic problems until after 1941.
By interfering with the economy, the government destroyed the economy’s ability to adjust. Wages, for example, must be allowed to fall along with prices in economic downturns (classical economics—see Economic Theory below). This allows businesses to maintain their employment levels even though their goods are selling for less, otherwise (if wages stay artificially high) employers must lay off employees as earnings fall. The result of Hoover’s high wage policies was more jobless people. Raising taxes took money away from consumers who would normally spend the funds for goods, and businesses who could have maintained higher employment levels. The drop in consumer spending, in part because of high taxes, severely affected the business community. High taxes rob funds from private enterprise normally used to create jobs and additional goods. Lowering taxes during economic downturns increases funds available for consumers and businesses. Raising taxes as Hoover and Roosevelt did was the worst possible economic move.
Roosevelt’s interventionist policies created substantial monetary, regulatory, and economic chaos. This led to increasing uncertainty in the business world and accordingly prolonged and deepened the depression. No one knew what was coming next, and new programs constantly came out of Washington that reduced profits and destroyed business flexibility. All these programs imposed massive additional administrative and legal requirements on business; consequently, predicting the future business environment became impossible. Those borrowing or investing large amounts of money need reliable business projections. If tomorrow brings more chaos, higher taxes, fewer markets, more regulation, and the like businesses cannot make reliable projections and avoid investing money or otherwise accepting risks. Fear of unexpected government moves can shut down business as effectively as enormous taxes.[204] As a result, private investment in industry fell to zero percent (that’s right—0%) through most of the depression, and in 1938 it was actually 800 billion less than zero. Investment from private sources went very negative after the crash.[205]
Liberal economist and politicians roundly reject the classical economic theories supported above. They endorse Keynesian economics or outright socialism. (See: FDR’s Folly, Powell, Jim, 2003, Three Rivers Press). Under their analysis of the Great Depression Hoover failed because he refused to do enough, but Roosevelt’s programs succeeded; however, they also contend Roosevelt’s success was tempered by a lack of spending. Keynesians argue that if Roosevelt had spent much more much sooner, like the government did in WWII, the Depression would have ended in two or three years (by 1936).
At least one factor going unanalyzed in the Great Depression is the impact of the great 1919 influenza pandemic. Falling populations can cause economic downturns, and the deaths of 100 million people worldwide could have contributed to the Great Depression. Over 500,000 may have died in the United States, 250,000 in Britain, 400,000 in France, and over 17 million in India. This all took place between 1918 and 1920, and the Great Depression arrived in 1929; thus, most will automatically believe there was no correlation. Still, the deaths of 100 million people (probably 5 percent of the world’s population) should have an economic impact. I know of no studies on this issue.
Economic Theories
There are at least six major economic theories floating around, and each made a difference in how governments approached the crisis.[206] Here is a quick survey of the basic positions:
1. Capitalism: is a system of private ownership of property, including the means of production, coupled with a small amount of government intervention in the economy. Capitalism does not aim for social justice. Unlike other economic ideas, capitalism’s aim has nothing to do with concepts of justice or equality. Capitalism recognizes human selfishness and claims it is good when harnessed correctly. It is a classless theory, where people make money by competing and not by government action. Economic control is by private market competition, where individuals or corporations compete against others to bring goods and services to the market desired by private citizens (they hope). This is a decentralized economic system where central planning is minimal. The markets are thought to regulate themselves. Regulation of business is the key form of government control under capitalism, but this regulation is to insure a “level playing field” and to protect the public against crime, but little else. This system was in use in America since its inception as a nation and was only de-railed by the Great Depression and the New Deal era. During the Great Depression, the USA passed many laws governing the economic life of the nation, but left the basic concepts of capitalism in place. In modern capitalist societies “welfare capitalism” has evolved, wherein the government provides safety nets for people who are out of work or otherwise unable to support themselves. Prior to the Great Depression the USA was, for decades, the world’s fastest growing and strongest economy.
2. Socialism: is a system of government ownership of most businesses and central planning of the economy. It is also a system of social justice. Under socialist thinking, equal property distribution is justice which will uplift the lower classes and bring universal peace accompanied by the reconciliation of all peoples (no joke). In this summary we will only deal with the economics of socialism. Socialist think the community as a whole should own the means of production; however, as applied in Europe in the 1930s, it generally meant the government nominally controlled the largest businesses but required very high taxes and the redistribution of wealth through social welfare programs. Governments embracing socialism guarantee free or low cost medical care, housing, food and other essentials to the populous. England, France, and other European economies began turning to socialism after World War I. Modern socialism continues to stress the importance of full employment, generous benefits to laborers, and high taxes to support the educational, medical, and welfare aspects of society. Central planning forces the production of products the government deems desirable, or prevents the manufacture of products deemed undesirable. This utopian dream of universal peace is yet to be achieved.
3. Marxism: was developed by Karl Marx and Friedrich Engels. Its aims include the liberation of workers from exploitation, coercion, and misery. The theory opines societies’ fundamental elements are determined by their methods of production. The method of production eventually decides the property relationships of society, and these property relationships determine everything else—including religion, politics, and classes of persons in that society, et al. In modern capitalist societies of the late 1800s, Marx and Engels believed history was reaching its climactic moment, as these societies would soon succumb to violent overthrow by the working classes. The proletariat (working classes) would establish the final society—one without classes—where each person worked and gave to others freely as their needs dictated. In this final classless society, ownership does not exist. Marx and Engels theorized the proletariat revolution was inevitable. This theory of an ultimate unavoidable utopian society eventually developed into Soviet style communism unlike anything envisioned by Marx. No nation has installed a utopian Marxist government, and no society ever managed anything like the utopia Marx and Engels imagined.
4. Communism: is a philosophy flowing from Marxism requiring the vesting of all property and authority in the community at large (the state). Its aims are justice, freedom, and humanity. In pure Marxism, each gave according to his ability, while the wealth of society was given according to ones needs, and without intervention by state authority (it did not exist); however, all communist states allow government acquisition of all property and all authority (power), making the state all powerful. This results in an autocratic centrally planned society. The government controls all aspects of life (for the good of all—of course). Prior to Stalin, the political bureau of the communist party was the sole determiner of the “will of the people” according to the Constitution of the USSR. In the Stalinist USSR of the 1930s and to Stalin’s death in the 1950s, only Stalin determined the will of the people in spite of the USSR’s Constitution (what document ever stopped a murderer?). After Stalin, the Soviet leaders partially melted into the political bureau for collectivist decision making, but the real and final power always rested with the leader of the party. As an economic system it has failed many tests, including the Soviet Union, Red China, and North Korea.
5. Mercantilism: an economic theory developed in the 1600s stressing the importance of international trade to acquire gold or silver; hence, shoring up a nation’s currency and economy. The ideal economy required importing raw materials at low prices and exporting finished goods at high prices, thereby attracting money (read, precious metals) into that nation’s economy. By maintaining a favorable balance of trade (exporting far more than importing), a nation would remain economically strong. Huge theoretical problems surfaced in the 1750s, because the Mercantilist theory assumed a fixed amount of trade; thus, attaining more trade for your nation required taking it from others. Later economists argued the size and strength of a nation’s economy determined its “wealth” not the amount of gold in its vaults. Economists also determined the amount of international trade was not fixed; thus, killing mercantilism as a theory. However, the reader should note that many nations in 2010 still operate on a quasi mercantilist theory by stressing the development of heavy industry, and adopting policies that make exports more important than imports (in the 1930s many nations were doing the same). Japan and China are the key modern examples—although they would deny using this theory. Both China and Japan stress the development of heavy manufacturing for export, and the import of low cost raw materials for manufacturing purposes.
6. Fascism: is a political philosophy requiring individuals be subservient to the state, and controlling the state was a strong leader executing the desires of the people (Stalin took a shortcut, he just executed the people). Social justice is feigned by fascists, but it is not a central concern. It is highly nationalistic and glorifies war. This becomes an economic philosophy because heavy industry is subject to state control, and getting everyone to work is a major goal of this political ideology. The Fascist would not care about a bicycle shop, but they became very concerned about what the nation’s major industries were producing, and they would order the major industries to produce what was good for the expansionist Fascist state. Under the Italian form of fascism industries were organized by type, and a committee of government and industrial bosses ran each economic sector through these committees—although the government had the ultimate say. Modern corporatism is said to be a form of fascism. Germany was the premier Fascist state in the 1930s; however, Benito Mussolini had introduced fascism into Italy years before Hitler initiated it in Germany. It totally failed as an economic and political philosophy; however, it is not dead. Many nations actually practice fascism while calling it something else. Cuba under Castro is an example of a fascist state calling itself communist.
Note the key distinctions between capitalism and, as a group, socialism, communism, and Marxism: Every one of capitalisms’ competitors stress social and economic justice. These philosophies stress the harm capitalism brings to workers through exploitation, economic oppression, and misery. To gain “justice” property owners in non-capitalist systems are separated from their money and property by the state. As a necessity, the three counter-capitalist philosophies emphasize the group is superior to the individual, otherwise the government cannot justify seizure of the capitalist’s property. Somehow, they think that once capitalism is dead something beautiful automatically takes its place. Once capitalism is gone human nature will change, all evil will be wrung out of the world, and a society without problems will bloom. In stressing the communal over the individual, the groups’ power increases to totally submerge individuals. The Greeks who faced down the Oriental tyrants of Persia would not have agreed with the communal standard. They argued, with word and sword, that the individual is superior to the group. Capitalism agrees with the ancient Greeks. So does Ayn Rand and others.
In capitalist societies several theories exist concerning the interface between the economy and government. One is minimal government interference or laissez faire economics—sometimes called classical economics. This was advocated by Adam Smith in TheWealth of Nations, published in 1776, and was the dominate capitalist economic theory until the 1850’s, after which governments took more economic control. Classical economic theory held that an economy would recover from downturns automatically. During the Great Depression the theory came under attack. JohnMaynard Keynes submitted another theoretical approach to capitalism in 1936. Keynes argued classical laissez faire economics failed in situations like the Great Depression. His theory explained that an economy would not correct itself automatically and could spiral down indefinitely if not stopped. The economy needed a kick, and that kick was to increase aggregate demand by increasing government spending (or by lowering taxes). Keynes felt the potential total economic output could be measured against the actual output, and if there was a significant gap that gap could be bridged by government spending. Thus, like Hoover and Roosevelt, the theory tells the government to spend its way out of economic problems. In 2009 the United States under President Obama spent money in the trillions to escape an economic recession. Obama spent more in 2009 than all the previous administrations combined, building the national debt to 12.4 trillion. In 2010 it is obvious the strategy failed. A society cannot spend its way out of economic trouble.
Capitalism started yet another economic theory that gained popularity in the 1980s under President Ronald Reagan—supply side economics. Under supply side economics, high taxes and government spending are economic negatives because they destroy incentives that encourage work and savings. Supply side economists think governments must scale back significantly, thereby allowing investments, savings, and innovation to pull the economy along or out of a depression. This theory wants the government to encourage high production, savings, and productivity through low taxes, few regulatory restrictions, and an improved infrastructure. It differs from laissez faire economics because it believes government must work toward encouraging high production and productivity with proper taxing and regulatory policies. Laissez faire economics wanted a super small government doing nothing to encourage or discourage economic outcomes. Supply side ideas seem to originate with theories advanced by Ludwig von Mises and Friedrich Hayek in 1974, then termed the business cycle theory. Business cycle theory claims action by a central bank harms the economy, and interest rates are better set by free markets. Only free markets can truly determine the rates of saving and borrowing that can safely take place. Mises and Hayek thought central banks commonly set interests rates improperly, usually causing quick economic upturns (bubbles) that eventually collapse. By allowing the markets to take care of themselves they can better regulate the credit markets and prevent the cycles of boom and bust.[207]
One great difference between classical and Keynesian economics revolves around the theory of wages. Should government allow wages to fall during an economic downturn? Classical economist argue wages must drop to keep people employed; conversely, Keynes argued that if wages drop it decreases incomes followed by in a drop in demand, which in turn decreases production further dropping income and demand in a never-ending downward spiral. Keynes theorized the way forward was to stop the downward cycle by a jolt of government intervention, translation—the government should spend a lot of money. Keynes’ theory, for the first time in economic history, attempted to show why classical economics could not reverse a depression cycle. Classical economists claim both Hoover and Roosevelt tried Keynes’ methods, to different extents, and they flopped. Keynesian economists argue his ideas were not properly implemented by either administration, and they say Roosevelt’s actions did work to relieve the depression.
Modern liberal economists argue that classical economics failed in the Great Depression, and that Keynes’ methods were not really tried as the government did not spend enough money. The student of history should note that classical economics were not tried atall. Hoover did not decrease taxes, lower regulations, lower tariffs, or otherwise get the government out of the economy as recommended by classical economics. In fact, Hoover and Roosevelt raised taxes, increased tariffs, increased regulatory intervention, increased uncertainty in the business world and did everything the classical economists said NOT to do. Even today, governments the world over do not respond to economic trouble by getting out of the way and decreasing taxes and regulations. Some of this stems from the Great Depression and the concept that classical economics failed. If they knew history they would know otherwise. This false concept still influences government economic decisions. History, and a real understanding of what actually happened, is critical for decision making.
European Government’s under Stress: Fascist and Communist
The economic chaos of the Great Depression led to disillusionment with democratic governments in Europe, and radical governments began to replace democracies. Pushing this change was a new ideology supported by a major world power, the USSR. The communists in Moscow formed revolutionary cells in nations throughout Europe and the world. These cells agitated for the overthrow of capitalist governments and their replacement with communist regimes. Communists preached that capitalism had led to World War I and the economic disaster that engulfed the world following the Great War. People seemed ripe for a change.
In response, radical movements grew up to oppose communism. Fascist parties appeared with the idea that government should control major industries and insure full employment, but the fascist rejected revolutionary change pushed by the communists. Owners of industries feared a workers revolution seizing their property. The fascists made headway, in part, because propertied people feared communism. They had good reason to, because in the USSR millions of murders followed the implementation of communist ideology. Fascists came to power in Italy (1922—Mussolini), Germany (1933—Hitler), and Spain (1934—Franco). How could the people of Europe know they were opting for one group of dictators and murderers, the fascists, over another group of dictators and murderers, the communists?
The Western Democracies: England, Canada, France, and the United States being the major ones, faced a frightening future. In a very few years, the world changed spectacularly with new untried economic and social philosophies being implemented, and murdering dictators running major world powers. England was frightened of Communist Russia (the USSR) and wanted a strong power in Central Europe to offset growing Soviet power. Since WWI dismembered Austria-Hungary into a hive of competing small nations, only Germany remained to potentially offset the USSR. Hitler assumed power in 1933, and immediately began rebuilding Germany’s military; nonetheless, Britain and France restrained their objections hoping Germany could counterbalance Soviet power. And so Germany could have if someone other than a demented dictator had assumed the helm.
Hammered in WWI, France wanted to avoid another war, especially against Germany. They wanted to stop Hitler’s rebuilding Germany, but they could not muster backing from their voters, or England, to oppose Hitler’s violations of the Versailles Treaty. Without England, France could not move. Hitler’s words were soothing, praising peace, but his actions threatened war. Hitler was rebuilding his army along with developing a large, modern air force and navy. The world’s newest weapon, the airplane, became war’s focal point. Germany could not rival England’s massive navy; however, airplanes could render the Royal Navy irrelevant. For the first time in history England’s navy could be leapfrogged by a major weapon system—the airplane. France expended vast sums on defense by constructing the Maginot Line, leaving little for aircraft and tanks.
Hitler then started making unreasonable territorial demands on neighboring nations. This went unchecked by the Western Democracies because their voters and intellectuals opposed arms races, increases in military spending, or standing up to Hitler. Virulent antiwar movements preached “Peace at any price” because of the sacrifices of the First World War. “How horrible, fantastic, incredible it is that we should be digging trenches and trying on gas masks here because of a quarrel in a faraway country between peopleof whom we know nothing,” stated England’s Prime Minister, Neville Chamberlain, on September 27, 1938. This sums up the feeling of the antiwar groups. Nothing was worth another conflict. Unfortunately, these attitudes threw away the sacrifices of WWI.
Meanwhile, Axis nations (the Axis: Germany, Italy, Japan) cheated on arms limitations agreements while the Western Democracies disarmed beyond the treaty requirements. Germany developed aircraft, submarines, and tanks in secret. Japan constructed super battleships in violation of the treaties. Unknown to the rest of the world, the Soviet Union was also preparing for war. In total secrecy the USSR developed the world’s best tank (the T-34) and a massive army. Stalin then decided to shoot the army’s officers, and for no reason.
The world stage began grimly drawing back the curtain on a catastrophe surpassing WWI. Once again, the world’s leading nations utterly mishandled the growing crisis, missing several chances to avoid war. Since 1900 Europe’s great powers, and the United States, had failed to stop WWI, the Great Depression, the ascension of brutal dictators, or the invasions of Ethiopia, Korea, and Manchuria. A decade long string of deadly decisions by European leaders triggered WWI, and similar decisions made it impossible to halt. Economic mismanagement produced the Great Depression, and it deepened because of governmental malfeasance. Now the Western Democracies chose to appease Hitler and ignore Japan. The West hoped Hitler and the Japanese warlords were rational, desiring peace, but diplomatic solutions meant nothing to the hungry dictators. Poor decisions by the major democratic powers led the world into a war in which the stakes were far higher than WWI.
English propaganda during the Great War portrayed German and its allies as an utter scourge; however, the Central Powers were more like their opponents than unlike them. Germany was no more a world scourge than England. No matter who prevailed in WWI, the world was safe from murdering, depraved dictators.
The enemies faced by the Western Allies in WWII were a scourge. The leaders of Germany, Italy, and Japan despised democracy. Hitler believed world conquest was his destiny, and Japan’s militarists thought Asia should be theirs. Mussolini was visualizing a new Roman Empire for himself around the Mediterranean. The Axis and Soviet dictators murdered massive numbers of people. Mild jokes about the Nazi regime often led to arrests and most unpleasant prison terms. To Hitler, Stalin, and militarist Japan, human life was meaningless. To these godless dictators every aspect of life was a part of the state while the individual was nothing. Life’s sole purpose was to serve the state, because an individual’s life belonged to the state. The modern dictators enjoyed new faces, new technology, new methods, new ideologies, but the same ancient goals of ultimate personal power over vast empires. This danger was very real and far worse than anything faced in WWI.
World War I destroyed the old order, and the new order was frightening beyond all measure. The Soviets, Nazis, and Japanese, using the machinery of the modern state (the bureaucracy), began controlling populations to a degree never before imagined. Their complete ruthlessness eliminated millions with assembly line efficiency. Thus, populations of entire world regions bowed to the whims of one man (or in Japan’s case one group of men—the militarists). Nearly everything done by these dictatorships was racist in nature. In Japan and Germany, the racist populations viewed themselves as deserving an exceptional place in the world. In both nations, those not of a certain assumed superior race were considered much lower forms of life and therefore could be brutally treated. The results included Japanese bayoneting babies in the Philippines, torching American prisoners of war just prior to liberation, and subjecting girls to vile sexual mistreatment. In Europe it meant the destruction of the Jews, gypsies, Slaves, and many more.
In the Soviet Union, the target was control rather than race. The Soviets shot anyone having a capitalist thought. Under the paranoid Stalin each budding rival faced quick eradication. At a party congress with 1,010 members attending, a secret ballot vote resulted in about one hundred (100) delegates voting no confidence in Stalin. Stalin had all 1,010 delegates murdered. Stalin routinely shot generals for losing a battle. Most consider Hitler the worst dictator of the era, but Stalin easily murdered many more and was more brutal and paranoid. Stalin is the most destructive and evil man who ever walked the face of the earth, especially if we credit the millions of deaths caused by the spread of communism to him.[208]
The Western Democracies in the 1930s were in real peril. Their economic decline resulted in decreased spending on military training and equipment, and reduced the size of their armed forces. The democratic nations were not keeping pace with technological advances or new combat methods. Many of these new combat methods originally came from the British and French military; however, the Nazis adopted these formally theoretical methods and actually put them to use. Germany rearmed and planned to use aircraft, tanks, artillery, and infantry together on the battlefield in a new kind of lightening war (Blitzkrieg).[209]
Japan developed a modern aircraft carrier force with some of the best fighters (the Zero), dive-bombers, and torpedo planes in the world. Japan developed the best torpedo used in WWII. Germany developed new methods of submarine warfare (the wolf pack). The West played catch-up from 1936 on. The dictators had no worries about popular opinion and began spending on military expansion as soon as they came to power.
Japan Taken Over By Militarists
Japan’s power expanded during World War I. By astute diplomacy Japan joined the victor’s side early on, and by rendering a minor amount of assistance managed to gain a bonanza of territory from Germany and China. Japan’s economy prospered during the war and during the 1920s. Japan had tried a parliamentary-style government with a Diet (the legislature) and a prime minister; however, all was not well with the government as the military continued exerting more control over decisions than desired by the civilian authorities. Radical elements in the military murdered two prime ministers who attempted to stop the war in China, but the civilian government held on tenaciously in an unsuccessful attempt to limit military influence.
As Japan prospered the military’s control waned; however, after the stock market crash of 1929 Japan’s prosperity vanished. Japan depended on external trade, and as the world markets failed so did Japan’s economy. As in Europe, this economic downturn helped radical elements expand their influence in the government. Eventually, the army and navy took complete control of the civilian politicians. The prime minister found his appointments subject to approval by the army, as the army controlled the cabinet. Japanese parliamentary government was a dead, rotting corpse by May of 1932. The militarists expanded the war in China and decided Japan must attack the Western Allies blocking Japan’s control of resources in the South Pacific. After France fell, believing the West remained focused on Hitler, Japan moved to improve her economic and military position by seizing key territory in Indo-China and the Pacific.
Japan’s desire to conquer China put her on a collision course with the United States of America. Japan attacked the United States mainly because it refused to acknowledge Japan’s claims to China,[210] continually demanded Japan stop murdering the Chinese, and wanted Japan to surrender Chinese territory won since 1937.[211]
The Future Goes Dark
Popular opinion about the future of the West soured in the 1930s. The Great Depression continued and memories of the Great War haunted everyone. In 1900 the future appeared brilliant, now it emerged dark and menacing.
The Impressionist art movement started bringing new vigor to the art world. The normally bright and colorful paintings of the Impressionist, made outdoors when possible, emphasized the immediate and the present. Previous art emphasized the classical world and great moments in history and not the actions of everyday folks. The pre-Impressionist painters normally worked in a studio, spending long hours perfecting the paintings so everything looked very lifelike. The Impressionist changed everything by recording seemingly unimportant events going on around them, working outside, and making paintings look like a bunch of paint splotches close up; however, when the viewer stood back, the paint splotches blended together by the eye transformed the painting into a glorious burst of originality, color, and substance.
After WWI art trends began to change, and a world of disjointed darkness, often with unrecognizable features, started to flow from the painter’s brush. Painting no longer bound itself to realism. Abstract painting started before WWI (about 1910) and foresaw the disruption of the modern world long before it happened. After WWI, life’s lack of meaning became a major theme in art. Another art form became important in the pre-WWI years—the motion picture. The stars of the silver screen became worldwide icons making enough money to qualify as royalty. The movies set forth popular themes such as romance, comedy, the futility of war, or living in the modern world. The dictators used the new art form for propaganda to keep the populace believing the party line. Governments used this instrument of the modern world for the modern purposes of suppression and mind control. Worst of all, it worked.
Science, so obvious in motion pictures, became more evident in everyday life. Overnight, it seemed, the world invented skyscrapers, electricity, hot water heaters, cars, inside plumbing, better medical care, wonder drugs, flushing toilets, vacuum cleaners, and a host of other modern tools and conveniences. During the Great Depression many great public works projects started construction, such as the Hoover Dam in the United States, and the autobahn in Germany.
The world was a strange mix of worry and wonder. The stress on society by the new fast-changing world, the frightening nature of world politics, the wonder of science and its fantastic accomplishments, the warnings coming from artists and writers of pending chaos, and the seemingly unending economic misery all swirled together creating a disconcerting world. Predictability was gone. Recall the world of ancient Egypt, the steadfastness of it all with the unchanging centuries slipping easily into history’s vastness. The ability to adapt may be humanity’s best trait, but that adaptation was accomplished over long spans of time. Now humans were adapting in months to titanic changes.
From 1850 to 1950, the changes were staggering. From fire light to light bulbs, horses to cars, balloons to jet aircraft, muskets to machine guns, dirt roads to paved roads, stage plays to movies and then television, brooms to vacuums, wash boards to washing machines, and much more. A person born in 1850 and living to the age of one hundred would see all these changes if they lived in the United States or Europe. A person living in Egypt in 2000 BC could live to the age of five hundred and never see any change (except a Pharaoh or two).
This review only scratches the surface of the changes going on after 1919, but this is the Super Summary so we cannot go too far. The tenor of the age was one of change and great improvement; but the long shadow of WWI, the Great Depression, and the darkening clouds of WWII put the stamp of uncertainty on the era. Once the dictators were in power, the world became ever more frightening and ever more deadly.
Let Us Learn
The Great Depression teaches us economies fail, often very fast. Even a stable economy can collapse with blinding speed. It also taught us the financial world is very complex and very important. Have some money in a safe place in case of economic decline. Trying to spend your way out of debt, or into prosperity, is folly. Two American presidents and their super educated advisors made that mistake. Learn from their errors. If hard times hit, cut spending. Do not follow the government’s example; they never get it right anyway.
The depression era shows we are all captives of our theories. Recall that the economists of the 1930s analyzed the crisis through the prism of their assumptions (theories). Many people never try to figure out what theories (assumptions) they use for analysis. For example, what is your theory of human nature? Are people fundamentally good or evil? Does life operate on cause and effect relationships; that is, if one is good to someone will they be good back? If we work hard, will rewards follow? Each of these questions, among others, discloses theories concerning life. Be aware of the theories binding your thought processes.
Watch events in other countries, because even small far away occurrences can affect the entire globe. The murder of one man plunged the world into the hell of World War I. Hitler came to power after winning one German election and torched the world. Stay alert to world events and unusual trends.
Watch for big trends and try to analyze them. A trend to worldwide dictatorship is not good. A trend toward bank failures should raise your concern. Very large trends usually have large impacts. Population trends within various nations, and the world, often foretell of critical changes.
Finally, the interwar era teaches that aggressors must be immediately confronted, and if war is necessary to prevent their exploitation, then war it must be. If one wants peace prepare for war. What seems like an ideological oxymoron is actually a primer on human nature. The strong will take advantage of the weak. The prepared will crush the unprepared. So it has been, so it is now, and so it will always be. To forget these facts is folly.
Books and Resources on the Great Depression
and the Rise of the Third Reich:
See http://www.euronet.nl/users/wilfried/ww2/1939.htm for excellent information on the state of European affairs just before WWII.
See http://history1900s.about.com/library/photos/blygd24.htm for excellent history and photographs of the Great Depression
Books on the Great Depression and the Rise of the Third Reich:
The Rise and Fall of the Third Reich, William L. Shirer. The classic, but not so easy to read.
The Coming of the Third Reich, Richard J. Evans, 2005, Penguin.
The Third Reich in Power, Richard J. Evans, 2006, Penguin. I like this book. It records many laws that were on the books under Hitler’s murderous regime. It records the nightmarish existence under the Nazi regime.
The Gathering Storm, Winston Churchill. Churchill is always easy to read, but beware of some of his concepts. Churchill was very English and very supportive of the concept of the English Empire.
FDR’s Folly, How Roosevelt and His New Deal Prolonged the Great Depression, Powell, J., 2003, Three Rivers Press. I actually enjoyed this book more than The Forgotten Man by Shlaes. FDR’s Folly gives more economic background.
The Forgotten Man, Shlaes, Amity, 2008, Harper. Excellent, but concentrates on personalities in the place of more economic facts.
The Politically Incorrect Guide to the Great Depression and the New Deal, R. Murphy, Regnery, 2009. Like all PIG books this one will raise your consciousness about the Great Depression, and may raise the hair on the back of your neck as well.
Against Leviathan, Government Power and a Free Society, Higgs, Robert, 2004, The Independent Institute. Wonderful book. A must read.
Churchill, Hitler, and The Unnecessary War: How Britain Lost Its Empire and the West Lost The World, Buchanan, P., Three Rivers Press, 2009. For a completely different take on the run up to WWII.